Sanctions and Anti-Money Laundering Bill [Lords]

Paul Sweeney Excerpts

2nd reading: House of Commons
Tuesday 20th February 2018 Commons Chamber

[Helen Goodman]

My hon. Friend has brought precisely the point to the House in highlighting that unfortunate episode.

Registers have been introduced in some of the British overseas territories, but they can be accessed by the authorities in London only when the authorities have a reason to be suspicious. The inadequacy of that approach was demonstrated by the publication of the Panama papers and the Paradise papers. According to the Guardian investigators, the law firm Mossack Fonseca, operating out of Panama, acted for 113,000 companies incorporated in the British Virgin Islands, which hosts 950,000 offshore companies. That is a country with a population of 30,000. This is public interest journalism at its best—fearless, determined and forensic. Had it not been for the excellent investigatory journalism, we would not have known that Britain’s high street banks processed $740 million from a vast money-laundering operation run by Russian criminals through anonymously owned firms, nor that Mukhtar Ablyazov, who fled Kazakhstan in 2009 after $10 billion went missing from the bank he chaired, had a Cayman Islands trust set up by law firm Appleby.

Significantly, HMRC has been able to use the information revealed in Panama and Paradise to open civil and criminal investigations into 66 people and pursue arrests for a £125 million fraud, tackle insider trading and place dozens of high net worth individuals under review. Imagine how much more effective it could be if transparency were the rule and not the exception.

[Mr Paul Sweeney (Glasgow North East) (Lab/Co-op)]

My hon. Friend makes a good series of points about the nature of the British overseas territories and Crown dependencies. Given that the Bill considers the whole nature of our governance structures after Brexit, does she agree that we should look in a broader sense at the curious structure of British overseas territories and Crown dependencies? We should perhaps follow the example of France, which has incorporated its overseas territories into its metropolitan country and given them a democratic place in its legislature. We could consider the same thing.

[Helen Goodman]

My hon. Friend is right that the situation is complex—we have one legal regime for the overseas territories and another for the Crown dependencies—but I think that that would be beyond the scope of the Bill.

The all-party parliamentary group on responsible tax, led by my right hon. Friend the Member for Barking (Dame Margaret Hodge), has been pursuing this agenda energetically for several years now, and across the House, Members want effective action.

Another scandal is the use of London property by oligarchs, corrupt officials and gangsters from across the globe. I am talking about people like Karime Macías, the Mexican wife of the former Veracruz Governor Duarte. He has been imprisoned and charged with corruption, money laundering and involvement in organised crime. His years in office saw a spike in disappearances and murders, while she claims to be a fugitive in London.

When I was young, if you drove through Chelsea at night, it was full of light because people actually lived there. Now, swathes of London are pitch black, as properties are bought simply as money safes. Meanwhile, in the outer boroughs, which the Foreign Secretary never visits—

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[Alison Thewliss]

I agree. That is the point I was trying to make, fairly badly I suppose: how long do we leave it? Has it been five years with no sign of anything, or five years with some sign of something? We need more conversations to see exactly where things are, but I am keen to support the right hon. Lady’s amendment.

There is slightly more concern about overseas territories such as the British Virgin Islands and Bermuda. When we look at the extent of the Panama papers and the Paradise papers, we cannot fail to be deeply concerned by the extent of nefarious transactions, out-and-out theft and money laundering, particularly when it involves, as other Members have said, the siphoning—the guzzling —of funds from countries whose populations can least afford it. We should be deeply concerned about that, and there seems to be little indication that they will comply at all. Perhaps there is a different approach from the Crown dependencies and the overseas territories on how willing they are to comply with what has to be done to make things transparent and open.

Moving on to part 2 and clauses 43 and 44, on the progress towards beneficial owners of overseas entities. This is very encouraging, but again the thing with the Bill is that action is required. Action is required to check up on all these companies and registrations. Action is required on enforcement and prosecution, and enforcement action requires agencies, intelligence, people and boots on the ground to make sure that it is done. It is fine to have law, but if we do not have anybody to enforce it, there is absolutely no point at all.

Scottish limited partnerships are a particular example of where things are not being enforced. This was bequeathed to me by Roger Mullin, and I am very grateful. It is estimated by Richard Smith and David Leask, who have been working hard on this issue—hon. Members will have seen some of David’s reports in The Herald—that an estimated 20,000 to 28,000 SLPs are of concern. The Herald recently reported that a former president of Peru has been accused of taking £4 million of bribes that have been funnelled through a shell firm based in Scotland. These things should be checked up on and enforcement action should have been taken, but SLPs have become a cover for all manner of murky and dubious behaviour.

As Transparency International and others have said, the missing link in all this is Companies House, because it does not have the duty to refuse a company’s registration; it has to register the company. It does not check up on whether it is legitimate, or whether the people who are registering it actually exist, and it is less compliant than the agents who use it, so there is no benefit to someone going through an agent if they can go through Companies House and avoid all the scrutiny. We have an opportunity in the Bill to close that loophole, because for me, Companies House is ignoring its money laundering duty.

There are wider concerns about shell companies. I invite the Minister to look at New Zealand, which was in a similar situation. However, its regulations have seen a near eradication of its 5,000 shell companies, which were registered to only about a dozen addresses in New Zealand. Part of the solution was a requirement for a New Zealand-based director, which made a huge difference almost overnight.

[Mr Sweeney]

Another interesting example from the recent Labour Government in New Zealand is the idea that they could ban the overseas ownership of property. Given the huge inflationary pressure in the UK housing market, usually from the opaque overseas ownership of UK property, perhaps we ought to consider that measure in this country as well.

[Alison Thewliss]

Yes, that would be a very useful addition. The Secretary of State did not answer the questions on the fifth money laundering directive: how it will be transposed; how it will be scrutinised; if there is a transitional phase; what that transition will look like; how we will prevent any loopholes; and how we will make sure that criminals do not exploit that transition.